Galina Selari, Lilia Russu Center for Strategic Studies and Reforms (CISR) www.cisr-md.org selari@cisr-md.org md.org, lilia.russu@gmail.com Sibiu, June 2015
For ages Moldova served as a sort of «contact zone» for various states, religions and cultures, as a result producing need for dialogue, tolerance and cooperation. The only way to affirm and subsist as a state is consciousness of own interests and priorities in diversity of regional integration processes
Moldova and Transnistria: Main Macroeconomic Indicators Moldova (MD+TN) Moldova Transnistria 1990 2014 per capita, USD Gross Domestic Product 8857 2233 2223 Industry 4507 871 1801 Agriculture 2389 543 402 Investment in Fixed Capital 980 408 290 Average Monthly Wage 518 297 3634 Average Monthly Pension 174 78 122 GDP per capita (2013) compared to: CIS average 72% 21% 20% EU average 56% 6% 6%
Integration History: EU and CIS (documents) 1994 Partnership and Cooperation Agreement RM - EU CIS Agreement on Establishment of Free Trade Zone 2011 CIS Agreement on Free Trade Area 2014 Agreement RM-EU on Deep and Comprehensive Free Trade Area
Integration History: Requirements European Union The accession process is rigorous, built on strict but fair conditionality, established criteria and the principle of own merit. This is crucial for the credibility of enlargement policy, for providing incentives to enlargement countries to pursue far-reaching reforms and for ensuring the support of EU citizens. The Commission has put particular emphasis on the three pillars of i) rule of law, ii) economic governance and iii) public administration reform. (European Commission) Customs Union To access the Eurasian economic formation, the candidate should pass through several stages, to demonstrate compliance with all rules and regulations of the Customs Union. Russia commitments to WTO are in force in the entire Customs Union space. The problem of covering expenses, inevitable in the case of the accession of other CIS countries, is under discussion. (Eurasian Economic Commission)
Moldova (Transnistria): Susceptibility to External Influence Moldova s economy is not quite susceptible to fluctuations in Eurozone. Moldova as other countries of the EEC region is the most sensitive to Russia s influence. For the non-commodity exporting countries such as Armenia, Georgia or Moldova, it is thanks to Russia that higher oil prices do not have a more negative impact on their economies. While the direct effect of higher oil prices may be negative, these countries also depend on the health of the Russian economy, which in turn benefits from higher oil prices, and therefore, on balance, they are at least no worse off. (Transition Report 2012. Integration ti Across Borders, pp. 40-42, 42 www.ebrd.com)
Trade Preferences: The European Union to the Republic of Moldova 1995 preferences for textile exports (applied provisionally since 1 January 1993); 1999 Generalised System of Preferences (GSP) (partial/total exemption from customs duties or lower duties than the MFN rates; applied to Sections 25-97 of HS); 2006 New Generalised System of Preferences (GSP+) (300 additional products mostly in agriculture and fishery sectors); 2008 Autonomous Trade Preferences (basically allow virtually all products originating in the beneficiary countries to enter the EU without t quantitative restrictions ti and customs duties, the only exemptions being imports of wine, baby beef and some fishery products to which tariff quotas apply)
Yields of Integration We and de European Union: Lessons Learned 1999 The Study on the Economic Feasibility of an EU-Moldova Free Trade Area identified ifi dthat due to the existing i legal, l administrative i i and economic conditions, Moldova could not obtain advantages from the creation of a free trade agreement. 2003 European Commission: i for Moldova, which hdoes not currently possess the competitive strength or administrative capacity to take on reciprocal obligations of an FTA, the EU is ready to consider developing new initiatives to grant better market access, in line with WTO obligations. ( Wider Europe Neighbourhood: A New Framework for Relations with our Eastern and Southern Neighbours, COM(2003) 104 final ) 2008 ATP regime : one third of goods from Moldova enter the EU duty free two thirds of the EU goods enjoy zero customs tariffs entering Moldova 2014 in the run-up up to the free trade: more than 50% of Moldovan export to EU goods after processing more than 50% of cumulative FDI - European origin Moldovan share in EU turnover with third countries 0,06%
Yields of Integration We and CIS: National Interest or Integration Slowdown in the level of integration in the field of trade, energy and agriculture; Abrupt increase in the level of integration in the field of labour migration and education; The macroeconomic indices of CIS countries tend to diverge rather than converge; Insufficient use of the integration potential by the Big Four CIS countries: Russia, Kazakhstan, Ukraine and Azerbaijan; Luck of integration incentives for CIS countries Eurasian Development tbank, Reports on the System of Indicators of Eurasian Integration, www.eabr.org - more than 50% of Moldovan export to CIS - autochthonous goods - about 11% of cumulative FDI - CIS origin. - Moldovan share in CIS turnover - 0,8%
Geography of External Trade Trade flows are distributed between the EU and the CIS markets mainly
Geography of External Trade: Details (as % to total export/import) EU-28 EU-15 CIS-10 Russia CIS-10 without Russia and Ukraine Other countries 2000 2010 2014 2000 2010 2014 2000 2010 2014 2000 2010 2014 2000 2010 2014 2000 2010 2014 Moldova Export 35.1 47.3 53.33 21.7 24.5 26.7 58.55 40.5 31.4 44.5 26.22 18.11 65 6.5 83 8.3 87 8.7 64 6.4 12.22 15.3 Import 53.5 44.3 48.3 29.1 25.9 24.5 33.4 32.6 27.3 15.4 15.2 13.5 4.6 3.7 3.5 13.1 23.1 24.5 Transnistria (without trade flows between two banks of the Dniester River ) Export 19.1 50.3 61.9 11.3 32.9 20.9 31.9 37.4 35.4 25.1 27.3 23.0 4.5 2.0 1.7 49.1 12.3 2.6 Import 35.6 16.2 19.4 21.8 9.6 10.9 52.3 67.7 74.2 34.8 45.3 50.1 2.9 7.0 10.7 12.1 16.1 6.4
Internal Trade-flows Тtrade relations between Moldova and Transnistria are maintained by economic agents only (in the absence of alternative)
Internal Trade-flows: Details (Moldovan Share in Trade-flows from Transnistria) NG Code Sections 2009 2010 2011 2012 2013 2014 Export - total 33.3% 34.7% 31.0% 35.7% 40.0% 38.9% I -IV (01-23) Food, beverages, etc. 13.7% 16.7% 9.6% 21.9% 25.4% 16.8% V (25-27) 27) Mineral products 86.9% 91.4% 85.7% 84.3% 94.6% 99.6% VI -VII (28-40) Products of the chemical industry 0.0% 3.6% 4.9% 0.0% 1.8% 6.2% VIII (41-43) Raw hides and skins, etc. 6.1% 0.0% 0.0% 12.9% 58.5% 0.0% IX - X (44-49) Wood and articles of wood 89.5% 92.2% 90.1% 77.2% 88.3% 92.3% XI (50-63) Textiles and textile articles 2.9% 2.7% 1.1% 0.9% 3.1% 3.3% XII (64-67) Footwear, etc. 92.4% 92.3% 92.3% 92.7% 82.8% 93.3% XIII (68-70) Articles of stone, plaster, etc. 84.3% 72.3% 68.4% 78.9% 69.2% 76.3% XV (72-83) Base metals and articles of base metal 3.6% 2.2% 7.9% 10.7% 13.6% 9.0% XVI - XVIII (84-92) Machinery and mechanical appliances; etc. 2.4% 4.1% 5.4% 3.2% 5.7% 11.5% XX (94-96) Miscellaneous manufactured articles 41.7% 0.0% 62.0% 37.5% 10.2% 13.8%
Internal Trade-flows: Details (Structure of Transnistrian Trade-flows to Moldova) NG Code Sections 2009 2010 2011 2012 2013 2014 Export - total 100% 100% 100% 100% 100% 100% I -IV (01-23) Food, beverages, etc. 2.1% 3.8% 2.3% 4.9% 10.3% 5.4% V (25-27) 27) Mineral products 79.3% 76.5% 70.6% 71.9% 65.9% 70.2% VI -VII (28-40) Products of the chemical industry 0.0% 0.1% 0.2% 0.0% 0.1% 0.2% VIII (41-43) Raw hides and skins, etc. 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% IX - X (44-49) Wood and articles of wood 0.2% 0.2% 0.3% 0.3% 0.5% 0.3% XI (50-63) Textiles and textile articles 1.1% 1.1% 0.5% 0.3% 1.2% 1.0% XII (64-67) Footwear, etc. 12.8% 16.1% 17.0% 12.4% 14.3% 14.7% XIII (68-70) Articles of stone, plaster, etc. 0.4% 0.4% 0.5% 0.5% 0.5% 0.3% XV (72-83) Base metals and articles of base metal 3.4% 1.4% 7.3% 9.0% 6.2% 6.9% XVI - XVIII (84-92) Machinery and mechanical appliances; etc. 0.2% 0.5% 0.8% 0.4% 0.7% 1.0% XX (94-96) Miscellaneous manufactured articles 0.7% 0.0% 0.5% 0.2% 0.2% 0.1%
Competitiveness of Economy Classical l Triad: competitiveness of goods and services together with structural one + Noneconomic factors: Political stability; Rule of law; Education ensuring competitive qualification of labour; High quality of public administration; Social interaction and regular dialog between different social groups; Social, institutional and mental flexibility.
Competitiveness of Economy: The Global Competitiveness Report 2014 20152015 Global Competitiveness Index 82 (144) Basic requirements - 90: Institutions - 121 Infrastructure - 83 Macroeconomic environment - 56 Health and primary education - 93
Competitiveness of Economy: (continuation) Global Competitiveness Index 82 (144) Efficiency enhancers - 88: High education and training - 84 Goods market efficiency - 103 Labour market efficiency - 82 Financial i market development - 100 Technological readiness - 51 Market size - 124
Competitiveness of Economy: (continuation) Global Competitiveness Index 82 (144) Innovation and sophistication factors -129 : Business sophistication - 124 Innovation 131
Competitiveness of Economy: (Voice of the Business Community) The most problematic factors for doing business: Corruption 22,2% Quality of public administration 19,7% Policy instability - 12,6% Tax regulation - 7,7% Inadequately educated workforce 7,1%
Moldova and Transnistria: Factors Influencing Quality" of Integration Processes The low level of exports (industries) diversification: 4 sections of Nomenclature of Goods cover more than 80% of Transnistrian and about 70% of Moldovan exports; Extra-openness of economies together with its non-competitiveness and limited internal incentives for growth: one of the most liberal trade regimes - 11 place of 125, EU - 25, Russia 44 together with limited access to external markets 73 place Structural disparities: lack of visible ibl actions to adapt the structure t of the economy to the changed environment (functioning under market conditions while maintaining the pre-market structure of economy); Limited internal sources of development against continued investment unattractiveness; OECD country risk classification - unacceptable risks for creditors and investors Deficit of mechanisms to transform external motivations to development in internal projects/poles of growth Defects of both economies are compensated by labour migration (for the last 10 years the inflow of remittances exceeded the net inflows of investment in Transnistria by 3 times and in Moldova by 4 times) and direct financial support of Transnistria/Moldova from external partners, Russia/EU;
Moldova and Transnistria: Transformation of the Integration Paradigm Mutual economic interests t could and should ldbe assumed as the basis for reasonable integration decisions Strict observance of all agreements and establishment of mechanisms for its implementation. Implementation of joint projects with the participation of the European and Customs Unions Priority - development of technological cooperation with the firm guarantees of investments protection.